A massive expansion in restorative justice, under which young offenders are required to meet their victims or the police, would cut reoffending rates and the numbers of young people in prison, according to a report published today. The report by the Independent Commission on Youth Crime and Anti-Social Behaviour – organised by the Police Foundation and funded by the Nuffield Foundation – also says it would deliver better justice for victims and avoid the automatic sending of youth offenders to court.

The commission bases its recommendations on restorative justice in Northern Ireland, where it has produced lower reconviction rates than conventional court sentences. It has also been used for non-serious offences by some police forces in England and Wales, where it is known as "street restorative justice".

A key element is the use of "youth conferencing", where the young offender with a parent (or other "appropriate adult") meets a trained police officer and, if they are willing, the victim of the crime. A plan of action for the young person is agreed, which may include writing an apology to the victim, paying money to the victim if theft is involved, or doing unpaid community work.

The commission includes the former director of public prosecutions Lord Macdonald QC and is chaired by Anthony Salz, a former senior partner at the law firm Freshfields.

Salz said: "Our reform proposals are positive and constructive in promoting cost-effective prevention; they are fair to the victims of crime in seeking redress and they are demanding on young offenders who will be made more aware of the human consequences of criminal and antisocial behaviour."

The commission recommends that there should be a statutory threshold on imprisonment, with the aim of halving the number of children and young people serving sentences. At present, just over 2,000 children and young people are in jail in England and Wales. Each secure place costs between £69,000 and £193,000 a year, the report says, with three out of four young offenders reconvicted within a year of completing their sentence. The commission argues that this "wasted" money should be reinvested in early intervention measures.

David Utting, secretary to the commission, said the recommendations did not include raising the age of criminal responsibility, which stands at 10.

"If there was political will that would be a different matter," he said. "But you can achieve very radical changes regardless of whether the minimal age changes."

The report goes further than Kenneth Clarke, the justice secretary, who last month attacked the "Victorian bang 'em up" prison culture of the last 20 years – a contrast to the former Tory party leader Michael Howard's "prison works" policy.